Credit Ratings: Meaning and Use

This section features information on the ACRA rating process, including its rating scales and rating definitions, as well as details of the regulatory practices of using ACRA ratings in normative and legal acts of the Russian Federation.

Rating definitions

A credit rating assigned to a rated entity by ACRA is an ACRA’s subjective opinion on the current and future (with a horizon of up to three years) ability of that rated entity to meet its financial obligations. In economic terms, the credit ratings assigned by ACRA under the national scale reflect a relative default probability of rated entities (or securities) when compared to the highest possible creditworthiness level in the Russian economy – the one that ACRA embeds in debt obligations of the Government of the Russian Federation and certain derivatives thereof.

A credit rating assigned by ACRA to structured finance instruments and obligations is an Agency’s subjective opinion on the likelihood and the magnitude of losses that may be related to rated obligations issued by a special purpose vehicle (SPV, or a similar issuer and rated entity) and that depend on the ability of this SPV to meet its financial obligations secured by the pledge of monetary claims and/or other property owned by this SPV and/or by third parties.

A rating assigned by ACRA to structured finance instruments and obligations may be a subjective opinion on both the likelihood of timely payments of individual components of the debt obligation in question (for example, interest only), or of its total amount (principal and interest). As a rule, credit ratings of structured finance instruments and obligations reflect:

Credit quality of certain assets in the collateral portfolio of financial obligations issued by an SPV (or a similar issuer and rated entity);

Legislative and contractual arrangements that define a special legal status of an SPV and reduce the probability of its bankruptcy;

A procedure for cash flow distribution between holders of one or more SPV’s issues and transaction counterparties;

Credit and operating risks associated with transaction counterparties and the impact of such risks on SPV financial obligations’ credit quality;

A reliability rating assigned by ACRA to an asset management company is an ACRA’s subjective opinion based on research results and reflecting the current and future ability of the asset management company to provide trustors with quality services under a standard trust management agreement. The term ‘quality services’ denotes lawful trust management services offered by asset management companies and aimed at maximizing returns under a set risk level, provided that trustor interests prevail over the company’s own ones, and due diligence and prudent investor principles are respected.

Analytical Credit Rating Agency (ACRA) was founded in 2015, with its 27 shareholders representing major Russian corporate and financial institutions and its authorized capital exceeding RUB 3 bn. ACRA’s main objective is to provide the Russian financial market with high-quality rating products. Methodologies and internal documents of ACRA are developed in compliance with the Russian legislation and with regard to global rating industry best practices.

The provided information, including, without limitation, credit and non-credit ratings, rating assessment factors, detailed credit analysis results, methodologies, models, forecasts, analytical reviews and materials, as well as other information placed on the ACRA website (further referred to as Information), coupled with the ACRA website software and other applications, are intended for information purposes only. Information must not be modified, reproduced or distributed by any means, in any way or form, either in whole, or in part, in marketing materials, as part of public relations events, in news bulletins, in commercial materials or reports without a prior written consent from, and reference to, ACRA. Any use of Information in violation of these requirements or the law is prohibited.

ACRA credit ratings reflect ACRA’s opinion about the ability of a rated entity to meet its financial obligations or about the credit risk of individual financial obligations and instruments of a rated entity at the time of publication of the relevant Information.

The assigned credit and non-credit ratings reflect all material information pertaining to a rated entity and known by ACRA (including the information received from third parties), the quality and reliability of which ACRA considers appropriate. ACRA shall not be responsible for the accuracy of information provided by clients or relevant third parties. ACRA does not audit or otherwise verify the provided data and shall not be held responsible for their accuracy and completeness. ACRA conducts rating analysis of information provided by customers using its own methodologies, with the texts thereof available on ACRA’s website – www.acra-ratings.com/criteria.

The only source that reflects the latest Information, including the one about credit and non-credit ratings assigned by ACRA, is ACRA’s official website – www.acra-ratings.com. Information is provided on an "as is" basis.

Information shall be considered by users exclusively as ACRA’s statement of opinion and must not be regarded as advice, recommendation or suggestion to buy, hold or sell securities or other financial instruments of any kind, nor shall it be viewed as an offer or advertisement.

Neither ACRA, nor its employees and persons affiliated with ACRA (further referred to as the ACRA Parties) provide any direct or implied guarantee expressed in any form or by any means regarding the accuracy, timeliness, completeness or applicability of Information for making investment and other decisions. ACRA does not act as a fiduciary, auditor, investment or financial advisor. Information must be regarded solely as one of the factors affecting an investment decision or any other business decision made by any person who uses ACRA’s information. It is essential that each of such persons conduct their own research and evaluation of a financial market participant, as well as an issuer and its debt obligations that may be regarded as an object of purchase, sale or possession. Users of Information shall make decisions on their own, involving their own independent advisors, if they deem it necessary.

ACRA Parties shall not be responsible for any action taken by users based on Information provided by ACRA. ACRA Parties shall under no circumstances be responsible for any direct, indirect or consequential damages or losses resulting from interpretations, conclusions, recommendations and other actions taken by third parties and directly or indirectly connected with such information.

Information provided by ACRA is valid only as of the date of preparation and publication of materials and may be amended by ACRA in the future. ACRA shall not be obliged to update, modify or supplement Information or inform anyone about such actions, unless the latter was recorded separately in a written agreement or is required by the legislation of the Russian Federation.

ACRA does not provide advisory services. ACRA may provide additional services, if this does not create a conflict of interest with rating activities.

ACRA and its employees take all reasonable measures to protect all confidential and/or material non-public information in their possession from fraud, theft, unlawful use or inadvertent disclosure. ACRA provides protection of confidential information obtained in the course of its business activities as required by the legislation of the Russian Federation.